Question

The following account balances were drawn from the financial statements of Grayson Company: Cash $ 5,000 Accounts payable $ 1,550 Accounts receivable $ 2,100 Common stock ? Land $ 8,600 Retained earnings, Jan.1 $ 3,300 Revenue $ 10,100 Expenses $ 7,550 Based on the above information, what is the balance of Common Stock for Grayson Company?

Answer 1

Answer:

The balance of Common Stock for Grayson Company is $8,300

Explanation:

For computing the common stock value, first we have to compute the ending retained earning balance which is shown below

= Beginning retained earning balance + revenues - expenses

= $3,300 + $10,100 - $7,550

= $5,850

Thus, the ending balance is $5,850

Now by applying the accounting equation we can compute the common stock value

Accounting equation is equals to

Assets = Liabilities + Equity

where,

Assets = Cash + Accounts receivable + Land

           = $5,000 + $2,100 + $8,600

           = $15,700

Liabilities = Accounts payable = $1,550

And, Equity = Ending Retained earnings balance + common stock

                   = $5,850 + common stock

Now, apply the above accounting equation which is shown below:

$15,700 = $1,550 + $5,850 + common stock

$15,700 = $7,400 + common stock

So, common stock = $8,300

Hence, the balance of Common Stock for Grayson Company is $8,300